Chicago Versus Austrian Libertarianism (Part I)

The following is in honor of my wife, who has undertaken the reading of Murray Rothbard’s For a New Liberty as means to better understand me, Mark Pelta, who got me going on this topic and Michael Makovi, who will likely disagree with everything I say here.

Within libertarianism there are two basic schools, the Chicago school, often associated with Milton Friedman, and the Austrian school, in its politically active form usually associated with Murray Rothbard. While they have their differences in terms of economic theory, particularly in regards to their understanding of money and the use of a Federal Reserve, I will focus here on the larger ideological question why be a libertarian and support free market policies over state solutions. I know I am being simplistic here, but I hope readers will bear with me. The Chicago school tends to argue for free market policies based on pragmatic arguments. The Austrian school tends to base itself around first principles. One starts with basic liberal principles, which people on the left claim to support, such as non-aggression, and then proceeds to argue that logical consistency demands that one accept libertarianism.

Take, for example, the issue of welfare. A Chicago school libertarian will tell you that government sponsored welfare is a mistake precisely because it does not help poor people. Through the process of "rent seeking," the money will be squandered by bureaucrats or by people who learn to game the system, living off of welfare instead of working. Even the money that makes it into the hands of the truly needy will cause them more harm than good in the long one as they will become dependent upon government and lose the instinctual ability to work their way out of poverty. An Austrian does not care whether or not government welfare is an effective remedy for poverty. What matters is that private property is protected and no coercive force be initiated. Funding welfare requires tax dollars which come from private individuals. Money is personal property and no person can be made to part with it without their consent. Furthermore government is a form of coercion as any time the government does something it is with the implied threat that if people do not comply they will be arrested and, if they go far enough in resisting, possibly killed. Thus, as Lysander Spooner famously argued, the government is essentially a highway man, who refuses to leave you alone after he has taken your money, lectures you about how you should live your life and insists that you should be grateful for the service he is providing by “protecting” you. Thus, from an Austrian perspective, the issue is not whether he has a heart to help the poor; it is that those who claim to be fighting poverty through government are really little Torquemadas, who are destroying personal liberty.   

Both the Chicago and Austrian schools have their potential vulnerabilities. The pragmatism of the Chicago school leads it to make ideological compromises on liberty out of a belief that a specific government intervention will benefit the public or at least out of a hope that by going along with the program they can convince the politicians to go with a less damaging plan. Thus, for example, Milton Friedman advocated school vouchers and a negative income tax. Instead of public schools, parents would receive a voucher that would allow them to send their children to a private school of their choice. Instead of welfare, people would receive a guaranteed income. Friedman’s purpose with these plans was to eliminate the government bureaucracies associated with these institutions, which he saw as the main threat, while still offering protection for the poor. Such a position, though, fails to confront the essential problem for the Austrian, mainly that private citizens are still being coerced into paying taxes to support programs that are not even designed to benefit them, but are essentially forms of wealth redistribution in favor of those the government deems “more deserving.”

In practice we have seen over the past few decades Milton Friedman and his followers making a Faustian bargain with the Republican Party (to say nothing of dictators like General Augusto Pinochet of Chile). In exchange for serving as the intellectual front of the Republican Party, the GOP has rhetorically committed itself to the cause of “small government” and in practice has even attempted to at least slow the expansion of the welfare state. While allying with the Republican Party has given libertarians a voice within mainstream politics and may have even produced some positive policy results, the past few years have made it clear that the price paid for these gains has been high, perhaps a little too high. Libertarians have found themselves having to defend a Bush administration that was far from libertarian, making libertarians appear hypocritical. Furthermore, libertarians came to be associated with the non-libertarian excesses of the Republican Party, religious extremism, militarism and a vulnerability to the manipulations of big business. This has created a situation in which, at a time when it should be clear as to the limitations of government interventions in the housing market and on Wall Street, the left has been able to argue that the economic crisis was a product of deregulation.

The Austrian school also has its vulnerabilities.  Instead of offering a list of policies that people can pick and choose from, depending on what strikes their fancy, it offers a single package as an all or nothing proposition based on a very specific ideology. It then seeks to convert people to this ideology without offering them a means by which they can come to it on their own. Part of the problem with distinct non-mainstream ideologies is that most people see themselves as “non-ideological.” What this usually means is that they are simply prejudiced to the dominant ideology. (Part of the advantage of being a dominant ideology is that you can claim to not be an ideology, but simple common sense. The disadvantage is that such an ideology cannot afford to create believers. A person who consciously believes in something is free from the delusion that he is not an ideologue.) Furthermore most people are not particularly concerned with ideas, but think in terms of relationships. One can wish all one likes to live in a country where people cared more about ideas, but one has to advance the cause of liberty with the people he has.

As an ideology whose main claim to authority is its consistency, Austrian style libertarianism is vulnerable to extreme ethical dilemmas. For example if a million people were about to die unless they received a drug, whose supply was in the possession of one individual, who refused to sell, an Austrian libertarian would have to admit that the private property rights of the one should override the interests of the many and that a million people should die rather than have the government use force to expropriate the supply of drugs. When faced with the Austrian love for hypothetical things like liberty and private property over tangible utilitarian goods such as providing lifesaving medication to those who need it, most people are going to conclude that libertarians at best lack a firm grip on reality and at worst are heartless selfish people, who care nothing for others.

This is not to say that either the Chicago or Austrian schools are wrong. Simply that each position carries a price, which must be weighed very carefully.

(To be continued …)